Lower Support Starts Around 1.92

If the 2.02 support zone fails to hold, a drop below 2.00 will have the price of natural gas heading towards the 78.6% Fibonacci retracement at 1.92. That price is given further significance as it confirmed by the gap up support level from late-April at 1.91.

Natural gas fell hard on Wednesday as it was down by as much as 0.16 cents or 7.5% for the day. It has established a wide price range for the day with a full body red candle. And it is on track to close weak, in the lower third of the day’s trading range.

Current Support May Lead to a Bounce

Nonetheless, it is possible that the 2.00 price area holds as support and attracts buyers. Today’s sharp selloff has occurred further into the downtrend and therefore, nearer to the end of the decline than it had been previously. A sharp drop near the end of a trend can sometimes signal capitulation as holders can longer take the pain of loss and finally sell. That creates a vacuum that allows for a potential sharp bounce.

Breakout Above Trendline Give First Sign of Strength

Unfortunately, on a daily chart there is no sign of strength until natural gas rallies above today’s high of 2.21. Of course, that may change in the coming days as alternative price levels may become apparent. Be that as it may, more aggressive investors and traders may key off intraday price patterns as they watch for signs of a bullish reversal from a key support zone. As noted previously, a rally above the internal downtrend line will provide a sign of strength, but trendlines are typically not too reliable on their own. Breaks through trendlines are more useful when confirmed by additional signs of strength.

For a look at all of today’s economic events, check out our economic calendar.